Debt/Equity (D/E) Ratio, calculated :
- by dividing a company’s Total Liabilities (STL + LTL)
- by its stockholders’ Equity (EQ),
This debt ratio used to measure a company’s financial leverage.
The DER indicates how much Debt a company is using to finance its Assets relative to the value of shareholders’ Equity.
The formula for calculating DER is:
The result can be expressed either as a number or as a percentage. Preferably DER ratio is 0.5 and below.
For DER is usually using abbr. D/E ratio.